Defined contribution plans aren't moving fast enough, far enough or comprehensively enough to add some best-practices features such as automatic enrollment and automatic escalation, according to a new survey of plan executives by the Defined Contribution Institutional Investment Association.
“What we've seen from sponsors is that they understand the issues,” said Catherine Peterson, vice president and director of retirement insights for J.P. Morgan Asset Management, New York, and primary author of the DCIIA survey. “They are attempting to do the right thing to raise saving rates, but there's a difference between what they believe and what they can do.”
DC plan executives have lofty goals for their participants, with 20% saying their optimal annual savings rate should be more that 15%, while 19% say the rate should be 14% to 15% and 39% advocate 10% to 13%.
But those executives don't always back those words with actions, Ms. Peterson noted. The most-offered default rate in auto-enrollment programs remains the traditional 3%, a rate the DCIIA survey said could be increased to help participants achieve higher retirement savings.
The survey also illustrated very little improvement in plans offering auto-escalation programs compared to a similar DCIIA survey in 2010. In both surveys, an overwhelming majority of plans with auto escalation used a 1% annual increment.